Why ARM Holdings plc, BTG plc and Tasty Plc could soar higher post-EU referendum

It’s time to look at ARM Holdings plc (LON: ARM), BTG plc (LON: BTG) and Tasty Plc (LON: TAST).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As we race towards Thursday’s referendum on Britain’s membership of the European Union, the London stock market seems as if it has been in a held-back state for several months.

I don’t believe the companies I’m holding will suffer in the medium-to-long term, and quite possibly not in the short term either. The next couple of days — before the result of the referendum — could prove to be a good time to buy a few shares in well-run, soundly-financed and growing businesses. So let’s look at ARM Holdings (LSE: ARM), BTG (LSE: BTG) and Tasty (LSE: TAST).

Developing new lines of growth

April’s first-quarter results from FTSE 100 microchip designer ARM Holdings showed revenue up 14% year-on-year and earnings per share up 15%. A string of small bolt-on acquisitions should help the firm to create new products to capture opportunities in the Internet of Things (IoT). 

The recent purchase of Apical is a good example. Apical’s advanced imaging products are used in more than 1.5bn smartphones and around 300m other consumer or industrial devices such as IP cameras, digital stills cameras and tablets.

ARM has captured the chip market for smartphones and other mainstream devices and I think the firm’s proactive approach should keep it in the forefront of new technological trends as they develop.

At today’s share price around 1,013p, ARM’s forward price-to-earnings (P/E) rating is just over 25 for 2017. That’s not a cheap valuation but it’s lower than for some time. If the firm develops the new areas of growth it hopes, investors may be glad in the end that they bought shares at today’s levels.

Driving forward on several fronts

Specialist healthcare mid-cap company BTG operates in a defensive sector, has a good record of successful execution and enjoys a strong balance sheet with surplus cash and zero borrowings.

May’s full-year results confirmed strong ongoing progress with underlying revenue growth of 14% year-on-year and earnings per share up 39%. The company is driving forward with several product lines, seeking expansion both organically and with its acquisition programme.

The recent share price of 640p puts BTG on a forward P/E ratio of just over 20 for the year to March 2018. But set against City analysts’ expectations for around 31% growth in earnings that year, the valuation looks fair for such potential.

A fast-growing rollout

UK-focused restaurant rollout proposition Tasty is perhaps the most vulnerable of these three firms to post-referendum shocks (if there are any). Any recession that develops could hurt the company’s operations and shares in the short term. However, I’m optimistic that the strength of the business model and the experience of the company’s management team will drive a positive medium-to-long term outcome for investors from here, whichever way the EU vote goes.

The expansion of Tasty’s restaurants, mostly branded Wildwood, goes from strength to strength, and the shares have done well over the last few years. Today’s 177p share price values the company at just over 16 times the earnings City analysts expect during 2017. That doesn’t look bad when set against likely earnings uplifts of 62% this year and 46% next year. Tasty’s trading formula works and growth looks set to continue.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold owns shares in ARM Holdings, BTG and Tasty. The Motley Fool UK has recommended ARM Holdings, BTG and Tasty. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »